Does It Make Economical Sense To Buy Diesel Car Over Petrol Car In India?

This is a questions which does not have one single answer for all. The answer to this question depends on the usage, average distance traveled per month, performance, maintenance and many other factors. Let me try to put things in simple words and lets discuss whether buying a diesel car make any financial sense.

First of all, Diesel engine cars are usually more fuel efficient, have more torque, lesser peak power and require less gearshifts compared to their petrol counterparts. Secondly the price of Diesel in India is much lesser than Petrol as of now (which may not remain like this, read on for reasons). Third the maintenance cost of a Diesel engine is usually more than that of a petrol car, however this difference is not too big especially with modern diesel engines.

In Indian Union Budget of 2012-13, there has been no announcement of special taxes on diesel cars, which is for a reason that diesel prices may themselves increase soon to reduce the subsidy burden on the Govt. So the answers even become more different. Lets have a detailed look at all these factors.

image – Diesel Engine Car

Do Diesel Engine Cars Have Low Cost Of Ownership?

The answer maybe yes if you drive your car a lot, like about over 1000 Km per month and No if you drive too less like 500 Km per month. This figure also varies from car to car and from with the price of Diesel and Petrol. Typically, a Diesel engine car costs about 10% to 20% more in India (for cars up to Rs. 10 Lakhs), but Diesel cars return better mileage and the diesel fuel costs less, which makes Diesel engine cars low-cost-to-run. But if you drive only 10 to 15 Km a day and you plan to keep a car for 3 to 5 years, spending about Rs. 80,000 extra for a diesel car will not result in substantial savings in fuel costs. But if you drive more, you will benefit from it as every time you buy fuel, you save money on it if you are buying cheaper fuel which costs approx. Rs. 40 per litre (as on 19 March 2012) compared to Petrol which costs approx. Rs. 66 per litre. But the Diesel prices are controlled by Govt. and subsidized, which is likely to change gradually, which may make the above equations very different. Read the next section for more details.

Will Diesel Prices Always Remain Much Cheaper Than Petrol Prices?

This is one big question which decides whether the diesel engine cars will prove to be economical in the long run or not. The answer is most likely NO, the diesel prices may not always remain “MUCH” cheaper than petrol. The reason I am stressing on “Much” is because as on date, the retail price of Petrol is about 65% more than that of Petrol. The reason is different taxation and govt. control on prices of Diesel. While the petrol prices are revised every couple of months depending on International crude oil prices, the diesel prices are not changed that often. Govt. of India is considering gradual deregulation of Diesel prices in India.

As reported by our fellow blog ICB, this information has been revealed by former Reserve Bank of India(RBI) governor and currently the chairman of the Prime Minister economic advisory council, C.Rangarajan to an Indian news channel. There has been no official timeline revealed for this deregulation and no details were shared. But it is likely to to be in steps and gradually the diesel prices will also be linked to the International crude prices. The prices of Diesel will still remain lesser than the Petrol, but they will not be Much Lesser like they are at present. There will be difference of 20% to 30% in the prices of Petrol and Diesel going forward in coming one to two years. The diesel cars will still remain cheap-to-drive than petrol cars even if the prices of petrol and diesel become same (hypothetically), because diesel engines are usually more fuel efficient because of their higher compression ratio technology. But the initial cost of a Diesel car will offset this low cost for those who drive less.

So do some basic calculation of how many Kms you drive every month, also check how much you pay for Petrol or Diesel every month and see how much you save in fuel cost every year if you drive a diesel car. If the cost saving over 4 years is more than the extra money paid (or to be paid) for the diesel car over petrol car, then it maybe a good decision to go for a diesel. But if the savings are not much higher than the initial cost, its better to go with petrol as you need less initial cost and lesser EMIs (if buying on car loan) for a petrol car compared to a diesel car.

Do Diesel Engines Car Perform As Good As Petrol Engine Cars?

Back in the year 2002, If you would have asked me this question, I would have probably said No, but the Diesel cars of this day, with CRDI Diesel Engines and Turbocharged engines are at least as much fun to drive as a petrol car in most cases. Although it depends from car to car, but many diesel cars run as good and in some cases better than their petrol counterparts. So if you are worried about the performance, its best to take a test drive and see for yourself if it makes you feel good to drive or not.

I hope above information will help you make up your mind on Diesel Vs Petrol car buying decision. For more queries or inputs or suggestion, feel free to drop a comment below.